Co-authored by Gregory C. Johnson

Negotiations over the renewal of an expired contract did not extend the terms of the business relationship between the negotiating parties, a Pennsylvania federal court ruled, thus a “limitation of suit” provision in the expired agreement foreclosed the plaintiff’s contract claims.

Storyville Enterprises in 1996 executed a 10-year franchise agreement with tobacco retailer Tinder Box Intl., Ltd., which required either party to bring a claim “arising out of or under [the] agreement” within one year of its accrual. The contract lapsed in October 2006, but neither party was aware of the expiration until four months later. After negotiations to extend the contract faltered, Tinder Box sued Storyville in November 2007 for breach of contract and other tort claims in U.S. District Court for the Eastern District of Pennsylvania.

Tinder Box argued that its contract claims were timely because post-expiration negotiations had prolonged the terms of the franchise agreement, based on the general principle that the provisions of an expired contract will govern the business relations between two parties if such relations continue. The District Court held that this principle did not apply because the terms of the contract clearly showed that the parties intended for the agreement to last 10 years and for it only to be altered in writing. Accordingly, all claims predicated on the contract were barred by the limitations provision. (Tinder Box Intern., Ltd. v. Patterson, 2010 WL 2302298 (June 7, 2010))